A generous and elevated mind is distinguished by nothing more certainly
than an eminent degree of curiosity; nor is that curiosity ever more
agreeably or usefully employed, than in examining the laws and customs of
foreign nations.

Large-scale corporations are the defining force on the globe. They are
everywhere, in almost every aspect of our lives. Parallel to this subtle
and sometimes not so subtle dominance, corporations have become dangerous
criminals as well. However, Corporations being non-human entities, their
criminal behaviour is also out of the ordinary.

Corporate criminality challenges or nags at our sense of reality. It is
this characteristic that makes corporate crime a tricky issue. The
development of corporate criminal liability has become a problem which a
growing number of prosecutors and courts have to deal with at the present
time. In the common law world, following standing principles in tort law,
English courts began sentencing corporations in the middle of the last
century for statutory offenses. On the other hand, a large number of
European continental law countries have not been able to or not been
willing to incorporate the concept of corporate criminal liability into
their legal systems. The fact that crime has shifted from almost solely
individual perpetrators only 150 years ago, to white-collar crimes on an
ever increasing scale has not yet been taken into account in many legal
systems. At the same time, crime has also become increasingly
international in nature.

Criminal Liability is what unlocks the logical structure of the Criminal
Law. Each element of a crime that the prosecutor needs to prove (beyond a
reasonable doubt) is a principle of criminal liability. There are some
crimes that only involve a subset of all the principles of liability, and
these are called crimes of criminal conduct.

The question of imposing criminal liability to a corporation for criminal
offences committed by directors, managers, officers and other employees of
the corporation while conducting corporate affairs has gained a lot of
importance in the jurisprudence of criminal law. The very basis for the
possibility of imposing criminal liability to a corporation is its
independent legal personality.

Now the question is whether a corporation as an artificial person is
capable of committing a crime and is criminally liable by the law or not.
The traditional view was that a corporation could not be guilty of a
crime, because criminal guilt required intent and a corporation not having
a mind could form no intent. In addition, a corporation had no body that
could be imprisoned.

Courts are especially likely to impose criminal liability on a corporation
when the criminal act is requested, authorized, or performed by the board
of directors, an officer or another person having responsibility for
formulating company policy or high level administrator having supervisory
responsibility over the subject matter of the offence and acting within
the scope of his employment.

Assessing Common Law Theories of Corporate Criminal Liability

The endorsement of criminal liability of corporations has largely been a
twentieth century judicial development, influenced by the "sweeping
expansion"[1] of common law principles. The majority of theories of
corporate criminal liability are typical of common law developments; they
have been constructed on a case-by-case basis. Despite their importance,
these theories have proved to be ineffective, for their lack of strong
theoretical basis and their individualistic roots.
Examples of these
models are the agency theory and, in a more elaborate form, identification
and aggregation theories.

Agency Theory
The agency theory was first developed in tort law and gradually “was
carried over into the criminal arena.[2] According to this theory, the
corporation is liable for the intents and acts of its employees.

Vicarious liability (or respondeat superior) is commonly employed in the
United States. In other jurisdictions, this theory is restrictively
established in relation to some strict liability and hybrid offences that
deal with matters such as pollution, food, drugs, health and safety at
work but not to mens rea offences.

The agency theory is based on the premise that criminal violations
normally entail two elements, actus reus and mens rea. Since corporations
are considered to be purely incorporeal legal entities, they do not posses
any mental state and the only way to impute intent to a corporation is to
consider the state of mind of its employees. The theory encompasses a
simple and logical method of attributing liability to a corporate
offender, if corporations do not have intention, someone within the
corporations must have it and the intention of this individual as part of
the corporation is the intention of the corporation itself. Courts in the
United States, where the theory is widely used, have developed a
three-part test to determine whether a corporation will be held
vicariously liable for the acts of its employees. First, the employee must
be acting within the scope and course of his employment. Secondly, the
employee must be acting, at least in part, for the benefit of the
corporation, yet it is irrelevant whether the company actually receives
the benefit or whether the activity might even have been expressly
prohibited. Thirdly, the act and intent must be imputed to the
corporation.[3]

Scope of Employment
The requirement that an employee must be acting within the scope of his or
her employment is met if the employee has actual or apparent authority to
engage in the act in question.[4] Actual authority exists when a
corporation knowingly and intentionally authorizes an employee to act on
its behalf. In New York Central Railroad,[5] the first Supreme Court case
holding a corporation criminally liable. The corporation was convicted of
violating the Elkins Act where a general and an assistant traffic manager
paid rebates for shipments of sugar. The agents acted within the scope of
actual authority because they were authorized to set up freight rates.
Therefore, they acted within the scope of authority conferred upon them by
the corporation. In United States v. Investment Enters., Inc.,[6] the
company was convicted of violating obscenity laws where the corporation’s
president conspired to transport obscene videos in interstate commerce.
The president’s unlawful acts could be imputed to the corporation because
he was an undisputedly authorized agent.

A corporation’s liability can be extended to acts performed within the
agent’s apparent authority. Apparent authority is defined as the authority
that has not been expressly agreed but can be understood by a third party
from the context of the agent’s acts. It is the authority which an
outsider could reasonably assume that an agent would have judging from his
position within the company, and the responsibility previously entrusted
to him, and the circumstances surrounding his past conduct.[7]

The question of whether an employee acted in the scope of his or her
authority is differently determined by each source of law and factual
framework. Federal courts have constantly held that a corporation may be
liable for the actions of its agents regardless of the agent’s position
within the corporation. These Courts have found that an employee’s act can
bind the corporation even where the corporation has implemented policies
prohibiting the behaviour. When an employee’s conduct is contrary to the
company’s compliance policies and specific directives, the company can
still be held liable.[8] The company can prove that it has established
corporate policies in an effort to reduce crime, but this does not prevent
a court from finding it criminally liable. The existence of an effective
compliance policy will not provide an absolute defence from criminal
liability,[9] but the company may qualify for a reduced penalty.

The concept of “scope of employment is common and has broad
interpretations. Thus, courts have held that even non-employees conduct
can be attributed to be as the corporation’s action. In United States v.
Parfait Powder, it was held that independent contractors might act for the
benefit of the corporation thereby exposing it to criminal liability.[10]

Many states have adopted specific legislative strategy to deal with
corporations that requires criminal acts be committed by “high managerial
agents in order to trigger liability. This position closely resembles the
identification theory. In some states, however, the rule is that the
actions taken by a corporation’s agents need not have been ratified by the
corporation’s directors, officers, or other high managerial agents in
order to be chargeable to the corporation.

A stricter standard can be found in the Model Penal Code. The Code
requires, as an additional element that the commission of the offence be
authorized, requested, commanded, performed or recklessly tolerated by the
board of directors or by a high managerial agent acting on behalf of the
corporation within the scope of his office or employment.[11]

By differentiating the ascription of liability based on the actions of
agents and based on the actions of high managerial agents, the Code
directly distinguishes between the ability of managerial employees and
lower employees to understand and prevent crime.

Benefiting the Corporation

The second element of corporate criminal liability according to the theory
of vicarious liability is that the act benefits the company. The benefit
need not be real, yet potential. As Hall points out, for this requirement,
the corporation need not actually receive a benefit; the employee’s mere
intention to bestow a benefit suffices.[12]

It is not necessary that the employee be primarily concerned with
benefiting the corporation since many employees act primarily for their
own personal gain.[13] Although the corporation did not actually gain from
the action or the agent violated a company policy, liability may still be
imputed to a corporation.

Identification Theory:

The doctrine of identification is the traditional method by which
companies are held liable in most countries under the principles of the
common law. The limitations of the agency theory led to the construction
of a direct liability theory. This theory was developed as an attempt to
overcome the problem of imposing primary, as opposed to vicarious,
corporate criminal liability for offences that insisted on proof of
criminal fault. In Lennard’s Carrying Co Ltd v. Asiatic Petroleum Co
Ltd,[14] Viscount Haldane fashioned a model of primary corporate criminal
liability for offences that require mens rea that would later be known as
the identification theory.

In the light of Haldane’s judgment:

A corporation is an abstraction. It has no mind of its own any more than
it has a body of its own; its active and directing will must consequently
be sought in the person of somebody, who for some purposes may be called
an agent, but who is really the directing mind and will of the
corporation; the very ego and centre of the personality of the
corporation.

As in the agency theory, the identification theory relies on an individual
to attribute liability to a corporation. However, while the former
doctrine simply imitates tort principles, the latter adjusts these
principles to the reality of corporate misconduct. Furthermore, the
identification theory introduces the personification of the corporate
body. According to this theory, the solution for the problem of
attributing fault to a corporation for offences that require intention was
to merge the individual within the corporation with the corporation
itself. Unlike the agency theory, the individual employee is assumed to be
acting as the company and not for the company. The theory de-emphasized
the need for the development of vicarious liability. The agency theory has
now been considered as unjust and lacking in defensible penal rationale.

Guilty Mind
The main underlying principle of the identification theory is the
detection of the guilty mind, the recognition of the individual who will
be identified as the company itself, who will be the company’s very ego,
vital organ, or mind.

Tesco Supermarket v. Nastrass[15] is the leading authority in this area.
Tesco Supermarket was a large chain store which was charged with an
offence against the Trade Descriptions Act 1968[16] by selling goods to
consumers at a price different than had been announced. The prosecution
concerned the advertisement of soap powder at a reduced price. A shop
assistant had mistakenly placed normally priced soap powder on the shelf.
The manager had failed to ensure that the powder was available at the
advertised price. There was a defence of due diligence which could be
pleaded by the company, unless the manager’s lack of due diligence could
be attributed to the company.[17] The question was whether the manager of
the store could be identified with the company via the common law
doctrine, or in other words, whether natural person or persons are to be
treated as being the corporation itself.

The House of Lords held that the manager was not a person of sufficiently
important stature within the corporate structure to be identified as the
company for this purpose, and since there had been due diligence at the
level of top management, the company could use the defence.

The metaphor
used by Lord Denning in an earlier case was a reference in this decision:
A company may in many ways be likened to a human body. It has a brain and
a nerve centre which controls what it does. It also has hands which hold
the tools and act in accordance with directions from the centre. Some of
the people in the company are mere servants and agents who are nothing
more than hands to do the work and cannot be said to represent the
directing mind and will of the company, and control what it does. The
state of mind of these managers is the state of mind of the company and is
treated by the law as such.[18]

The manager of the store was not considered as the mind of the store.
Instead, he was regarded as a servant, the hands of the store. In order to
give some guidance for the problem of who is to be considered as the
corporation itself for the purposes of imputing liability, some standards
were articulated in Tesco Supermarket v. Nastrass. Lord Reid stated that,
Normally the board of directors, the managing director and perhaps other
superior officers of a company carry out the functions of management and
speak and act as the company.

Viscount Dilhorne explained that in his view a person who is in actual
control of the operations of a company or of part of them and who is not
responsible to another person in the company168 would be the directing
mind and will of the company. Lord Pearson underscored this reasoning
adding that the constitution of the company concerned should be taken into
account in order to indicate if the person is in a position of being
identifiable with the company.

Tesco’s criterion is still the most frequently used for determining whose
corporate agent can be identified as the embodiment of the corporation
itself. According to these established pattern, the guilty mind, the ego
or ‘brain of the company must be a “vital organ of the company, an
individual who is sufficiently senior within the corporate structure to
represent, metaphorically, the mind of the company. Generally, the guilty
mind can be identified with the board of directors, the top officers of
the corporation, those who are delegated responsibility, and those that
have duties of such responsibility that their conduct may fairly be
assumed to represent the policy of the corporation.

The array of personnel whose acts can be imputed to the company varies
from jurisdiction to jurisdiction. Australian courts have shown a marked
tendency to apply Tesco principles. Some American states and the American
Model Penal Code also accept this approach.[19] In England, where the
principles were molded, the Tesco standard is strictly followed, yet it
can be shaped differently in every situation. For example, in Meridian
Global Fund Management Asia Ltd v Securities Commission,[20] Lord
Hoffman[21] stated that in each case the court had to fashion a special
rule of attribution for the particular substantive rule. Canadian courts
adopted a broader view of the Tesco principles and stretched the set of
personnel that can be identified with the company itself.[22] The wider
Canadian position can be contrasted with the restricted English
application of the doctrine of identification, established in Tesco.

In
Canadian Dredge and Dock the distinctive posture is clearly defended in a
comparative ground:

The application of identification rule in Tesco,
supra, may not accord with the realities of life in our country. Then it
is said that the simple size of Canada means that corporations may be
widespread, and consequently may have a decentralized control, which
implies that the directing minds and will can be found in different
geographic locations. Estey J. stated that:
This must be a particularly so in a country such as Canada where corporate
operations are frequently geographically widespread. The transportation
companies, for example, must of necessity operate by the delegation and
sub-delegation of authority from the corporate centre: by the division and
subdivision of the corporate brain; and by decentralizing by delegation
the guiding forces in the corporate undertaking.

Bill C-45, enacted on November 7, 2003, extends the concept of directing
mind; it uses the expression senior officers" to include everyone who has
an important role in setting policy or managing an important part of the
organization’s activities. For crimes of negligence, the bill proposes a
departure from the concept of directing mind when it states that mental
element of the offence will be attributable to corporations and other
organizations through the aggregate fault of the organization’s senior
officers (which will include those members of management with operational,
as well as policy-making, authority).

Aggregation Theory:

Over the past decades the corporation’s internal structures have been
altered and expanded. Large modern corporations are no longer set up with
a clear, pyramid-like hierarchal structure of authority and power. On the
contrary, modern corporations have multiple power centers that share in
controlling the organization and setting its policy. The complexity of
this new setting has created some challenges for the imposition of
criminal liability to corporations under the traditional approaches.
Sometimes power and influences are extremely diffused in the corporation
context so that it is almost impossible to isolate the responsible
individual whose intention could be attributed to the corporation itself.
The aggregation or collective knowledge doctrine was developed as a
response to this puzzling scenario.

The aggregation theory is grounded in an analogy to tort law in the same
way as the agency and identification doctrine. Under the aggregation
theory, the corporation aggregates the composite knowledge of different
officers in order to determine liability. The company aggregates all the
acts and mental elements of the important or relevant persons within the
company to establish whether in toto they would amount to a crime if they
had all been committed by one person.180 According to Celia Wells,
aggregation of employees’ knowledge means that corporate culpability does
not have to be contingent on one individual employee’s satisfying the
relevant culpability criterion.[23]

The theory of aggregation is a result of the work of American Federal
Courts. The leading case is United States v. Bank of New England,[24]
where the bank was found guilty of having failed to file CTRs (currency
transactions reports)[25] for cash withdrawals higher than $10, 000. The
client made thirty-one withdrawals on separate occasions between May 1983
and July 1984. Each time, he used several checks, each for a sum lower
than the required total, none of which amounted to $10, 000. Each check
was reported separately as a singular item on the Bank’s settlement
sheets. Once the checks were processed the client would receive in a
single transfer from the teller, one lump sum of cash which always
amounted to over $10,000. On each of the charged occasions, the cash was
withdrawn from one account. The Bank did not file CTRs on any of these
transactions. Each group of checks was presented to a different teller at
different times.

In this case, the question was if any knowledge and will could be
attributed to the corporate entity. The trial judge found that the
collective knowledge model was entirely appropriate in such context, and
stated as much in addition, however, you have to look at the bank as an
institution. As such, its knowledge is the sum of all the knowledge of all
its employees. That is, the bank’s knowledge is the totality of what all
of the employees knew within the scope of their employment.

So, if
employee A knows of one facet of the currency reporting requirement, B
knows another facet of it, and C a third facet of it, the banks know them
all. So, if you find that an employee within the scope of his employment
knew that the [reports] had to be filed, even if multiple checks are used,
the bank is deemed to know it if each of the several employees knew a part
of the requirement and the sum of what the separate employees knew
amounted to the knowledge that such a requirement existed. The partisans
of collective knowledge explain that the difficulty of proving knowledge
and willfulness in a compartmentalized structure such as a corporation
should not be an impediment to the formation of the corporation’s
knowledge as a whole. According to these positions, it is not essential
that one part be aware of the intention and act of the other part for the
formation of aggregate knowledge.

In Bank of New England, it was explained
that:

Corporations compartmentalize knowledge, subdividing the elements of
specific duties and operations into smaller components. The aggregate of
those components constitutes the corporation’s knowledge of a particular
operation. It is irrelevant whether employees administering one component
of an operation know the specific activities of employees administering
another aspect of the operation.

This theory appears to combine the respondeat superior (vicarious
liability) principle with one of presumed or deemed knowledge. Even if no
employee or agent has the requisite knowledge to satisfy a statutory
requirement needed to be guilty of a crime, the aggregate knowledge and
actions of several agents, imputed to the corporate executive, could
satisfy the elements of the criminal offence. In spite of the wide
interpretation of the aggregation theory employed in Bank of New England
decision, American courts have been careful with the application of this
ruling. Some federal courts have had a narrower understanding, and
distinguished collective knowledge from collective intent or collective
recklessness. According to this version, the attribution of mens rea or
intent or recklessness to a corporation necessarily depends on the full
development of this culpable state of mind in one of the corporation’s
employees. Contrary to the Bank of New England decision, American courts
understand that a corporation could not be deemed to have a culpable state
of mind when that state of mind is not possessed by a single employee. In
Inland Freight Lines[26] it was clarified that corporate collective
knowledge and collective criminal intent do not necessarily have the same
meaning.

The idea of aggregate knowledge is fundamental to the notion of corporate
fault; it represents a departure from the paradigm that intention must
come from a single individual. However, as to be expected, the rupture
with old concepts is not brusque, which is the reason why individualism is
still present in the collective knowledge theory. Corporate fault is the
fault of the group and not of the corporation itself. This fact does not
take merit away from the aggregation theory. Common law theories have been
the necessary bridge between the individualistic and organizational
approaches. They are bringing back to life principles of criminal law that
have prevailed before the prevalence of the principle that only
individuals commit crimes. In all of these theories, corporate fault is
still traced back to an individual or a group of individual, yet they
allow the attribution of criminal liability to corporations.

Corporate Criminal Liability In India
Criminal Liability is attached only those acts in which there is violation
of Criminal Law i.e. to say there cannot be liability without a criminal
law which prohibits certain acts or omissions.[27] The basic rule of
criminal liability revolves around the basic Latin maxim actus non facit
reum, nisi mens sit rea. It means that to make one liable it must be shown
that act or omission has been done which was forbidden by law and has been
done with guilty mind.

Hence every crime has two elements one physical known as actus reus and
other mental known as mens rea.[28] This is the rule of criminal liability
in technical sense but in general the principle upon which responsibility
is premised is autonomy of the individual, which states that the
imposition of responsibility upon an individual flows naturally from the
freedom to make rational choices about actions and behaviour.[29]

Although the general rule as stated above is applicable to all criminal
cases but the criminal law jurisprudence has seen one exception to the
above said concept in form of doctrine of strict liability in which one
may be made liable in absence of any guilty state of mind. This happens in
cases of mass destructions through pollution, gross negligence of the
company resulting in widespread damages like in the Bhopal Gas tragedy,
etc.[30]

Hence, there can be no dispute of imposing criminal liability on
corporations as regards no mens rea requiring offences but however, it
used to come to be questioned before the Chartered Bank judgement when
mens rea was concerned.

Corporate Criminal Liability - The Necessity:

In the modern day world, the strong effect of activities of corporations
is incredible on the society. In the day to day activities, not only do
the corporations affect the lives of the people as a blessing but also
many a times proves disastrous which then falls under the category of
crimes. For instance, the Uphar Cinema tragedy or thousands of scandals
especially the white collar and organized crimes can come within the
category that requires immediate concern. Despite so many disasters, the
law was unwilling to impose criminal liability upon corporations for a
long time. This was for basically two reasons that are[31]:
# That corporations cannot have the mens rea or the guilty mind to commit
an offence; and
# that corporations cannot be imprisoned.

These two obstacles were managed to survive till late 20th and very early
21st century. The general belief in the early 16th and 17th centuries was
that corporations could not be held criminally liable. In the early 1700s,
corporate criminal liability faced at least four obstacles, i.e.

Firstly, attributing acts to a juristic fiction, the corporation.
Eighteenth-century courts and legal thinkers approached corporate
liability with an obsessive focus on theories of corporate personality; a
more pragmatic approach was not developed until the twentieth century.

Secondly, the legal thinkers did not believe corporations could possess
the moral blameworthiness necessary to commit crimes of intent.

Thirdly, the ultra vires doctrine, under which courts would not hold
corporations accountable for acts, such as crimes, that were not provided
for in their charters.
Finally, the fourth obstacle was court’s literal understanding of criminal
procedure; for example, judges required the accused to be brought
physically before the court.

Corporate mens rea

Courts in United States were slow to extend corporate criminal liability
to crimes of intent8 and the process in India was even slower. Now, it is
well settled that a corporate can be held liable for committing offences
that require mens rea as now it has been recognized that a corporate can
have a mens rea.

Generally, corporations may be held criminally responsible for the illegal
acts of its employees if such acts are[32] related to and committed within
the course of employment, committed in furtherance of the business of the
corporation and its imbibed culture; for example, if the corporate
structure is so organized as to deprive senior managers of the information
they need to exercise such powers, this would indicate a corporate culture
that is designed to elude law enforcement. Generally, deficient structures
for the dissemination of information within the firm would also be
suspect. Moreover, in organized crime networks, the culture and the
objective of the corporation in itself is to commit crimes, authorized or
acquiesced in by the corporation. In these cases, the corporate itself
authorizes and sometimes directs its employees to enter into unethical
business practices which are sanctioned by the organization structure like
in case of recovery wherein hiring of antisocial elements is directed many
a times.

Hence, there is no obstacle in the criminal law jurisprudence whatsoever
to impose criminal sanction on a corporation since it can have a mind of
its own and also an environment wherein crime is nurtured. However, this
concept still not contemplated in the statutes in India.

Statutory Inadequacy:
This developed jurisprudence does not find a place in the Indian statues
as they still make only the officials responsible for the act criminally
liable and not the corporate itself. Instances of this are:
Sections. 45, 63, 68, 70(5), 203, etc of the Indian Companies Act wherein
only the officials of the company are held liable and not the company
itself; it is also reflected through the Takeover Code. The various
sections of the IPC that direct compulsory imprisonment does not take a
corporate into account since such a sanction cannot work against the
corporation.

These are the major statutes in their respective field that are devoid of
necessary legal aspects. On the other hand, law has also developed to an
extent with regard to certain other statutes and their respective penal
provisions wherein a fine has been imposed on the corporations when they
are found to be guilty.
Some such examples are:
Section 141 of the Negotiable Instruments Act, 1862[33]
Section 7, Essential Commodities Act[34]
Section 276-B of the Income Tax Act[35]

The statutes mentioned in the first point need to be amended soon to
include corporate criminal liability and not merely restricting criminal
liability to its personnel.

Corporate Punishment

In India, certain statutes like the Indian Penal Code talk about kinds of
punishments that can be imposed upon the convict and as per Section 53
include death, life imprisonment, rigorous and simple imprisonment,
forfeiture of property and fine. In certain cases the sections speak only
of imprisonment as a punishment like in case of offence under Section 420.
Thus the problem arises as to how to apply those sections on the companies
since a criminal statute needs to be strictly interpreted and in such
statutes there is no scope for corporations to be imprisoned.
Going with the above viewpoint and with the growing trend of corporate
criminality, the Courts in India have finally recognized that a
corporation can have a guilty mind but still were reluctant to punish them
since the criminal law in India does not allow this action.

In The Assistant Commissioner, Assessment- II, Bangalore and Ors. v. Velliappa Textiles Ltd. and Ors.[36], B.N. Srikrishna J. said that
corporate criminal liability cannot be imposed without making
corresponding legislative changes. For example, the imposition of fine in
lieu of imprisonment is required to be introduced in many sections of the
penal statutes. The Court was of the view that the company could be
prosecuted for an offence involving rupees one lakh or less and be
punished as the option is given to the court to impose a sentence of
imprisonment or fine, whereas in the case of an offence involving an
amount or value exceeding rupees one lakh, the court is not given a
discretion to impose imprisonment or fine and therefore, the company
cannot be prosecuted as the custodial sentence cannot be imposed on it.

The legal difficulty arising out of the above situation was noticed by the
Law Commission and in its 41st Report, the Law Commission suggested
amendment to Section 62 of the Indian Penal Code by adding the following
lines:

“In every case in which the offence is only punishable with imprisonment
or with imprisonment and fine and the offender is a company or other body
corporate or an association of individuals, it shall be competent to the
court to sentence such offender to fine only.

As per the jurisprudence evolved till then, under the present Indian law
it is difficult to impose fine in lieu of imprisonment though the
definition of ‘person’ in the Indian Penal Code Includes ‘company.’ It is
also worthwhile to mention that our Parliament has also understood this
problem and proposed to amend the IPC in this regard by including fine as
an alternate to imprisonment where corporations are involved in 1972.[37]
However, the Bill was not passed but lapsed. Such a fundamental change in
the criminal jurisprudence is a legislative function and hence the
Parliament should perform it as soon as possible by also considering the
following arguments that the author has brought about.

However, the Apex Court later overruled this decision in Standard
Chartered Bank and Ors. v. Directorate of Enforcement and Ors[38] on
account of providing complete justice to the aggrieved which could not be
prejudiced in the garb of corporate personality. In this case, the Court
did not go by the literal and strict interpretation rule required to be
done for the penal statutes and went on to provide complete justice
thereby imposing fine on the corporate.

The Court looked into the interpretation rule that that all penal statutes
are to be strictly construed in the sense that the Court must see that the
thing charged as an offence is within the plain meaning of the words used
and must not strain the words on any notion that there has been a slip
that the thing is so clearly within the mischief that it must have been
intended to be included and would have included if thought of.[39]

Simultaneously, it also considered the legislative intent and held that
all penal provisions like all other statutes are to be fairly construed
according to the legislative intent as expressed in the enactment. It was
of the view that here, the legislative intent to prosecute corporate
bodies for the offence committed by them is clear and explicit and the
statute never intended to exonerate them from being prosecuted. It is
sheer violence to commonsense that the legislature intended to punish the
corporate bodies for minor and silly offences and extended immunity of
prosecution to major and grave economic crimes. If an enactment requires
what is legally impossible it will be presumed that Parliament intended it
to be modified so as to remove the impossibility element. These Courts
have applied the doctrine of impossibility of performance [Lex non cogit
ad impossibilia] in numerous cases including the aforementioned.[40]

Finally, the Court decided that as the company cannot be sentenced to
imprisonment, the court cannot impose that punishment, but when
imprisonment and fine is the prescribed punishment the court can impose
the punishment of fine which could be enforced against the company. Such
discretion is to be read into the section so far as the juristic person is
concerned. Of course, the court cannot exercise the same discretion as
regards a natural person. Then the court would not be passing the sentence
in accordance with law. As regards company, the court can always impose a
sentence of fine and the sentence of imprisonment can be ignored as it is
impossible to be carried out in respect of a company. This appears to be
the intention of the legislature and we find no difficulty in construing
the statute in such a way. We do not think that there is blanket immunity
for any company from any prosecution for serious offences merely because
the prosecution would ultimately entail a sentence of mandatory
imprisonment.

The well known maxim ‘judicis est just dicere, non dare’ best expounds the
role of the court. It is to interpret the law, not to make it. This read
with the Doctrine of Separation of Powers has bound the Court’s hands in
imposing various kinds of punishments and all that it is left with is to
impose fines. In order to avoid compelling the Courts to go out of the
statute and interpret and therefore define the law which is essentially
the task of the legislature[41], it is advised that the legislature amends
the various penal statutes in a way so as to bring in various forms of
punishments for the corporations as well, thereby maintaining the
separation of powers regime and hence the rule of law.

Feasibility of fine

Fine is the most common punishment in every part of the world and it is a
punishment the advantages of which are so great and obvious that we
propose to authorize the courts to inflict it in every case… Imprisonment,
transportation, banishment, solitude, compelled labour are not equally
disagreeable to all men. With fine the case is different. In imposing a
fine it is necessary to have regard to the pecuniary circumstances of the
offender, as to the character and magnitude of the offence. The mullet
which is ruinous to the labourer is easily borne by a tradesman and is
absolutely unfelt by a rich zamindar.

The imposition of fines may be made in four different ways as provided in
the Indian Penal Code. It is the sole punishment for certain offences and
the limit of maximum fine for some. In certain cases fine is an
alternative punishment but the amount is limited. In certain offences it
is imperative to impose fine in addition to some other punishment and in
some it is obligatory to impose fine but no pecuniary limitation is laid
down.

Fines can be an effective punishment in cases of traffic offences or
offences against property. But where the offence is grave, in the sense of
murder or rape or kidnapping for death etc., it is questionable whether
fine can achieve the object of punishment. Another shortcoming of this
form of punishment is that it brooches the poor and eases the rich. The
rich can easily get away by paying a huge fine while the poor may have to
hustle hard even to get a hundred rupees. Nevertheless, its efficacy in
specific crimes has made it a necessary mode of sanction. This shows that
biggest drawback in restricting fine as the sole form of punishment to
corporations since with their massive bank accounts, it is easy for them
to get away with the criminal liability and it also does not solve the
purpose of punishment since neither the corporates would be deterred nor
would they be restrained for committing crimes like corporate killings
(for instance: using poor quality of material in building dams which would
soon collapse thereby dislocating and even killing inhabitants around the
area or the labourers themselves). Looking into the above drawbacks, there
is a need to evolve new forms of punishments which could effectively deter
the corporate from engaging into any criminal activity.

En route for new forms

Presently, all the penal provisions of various statutes include only fine
as a form of punishment that can be imposed on a company. So is the case
with judicial pronouncements on the aspect of sentencing. In addition to
this, the Law Commission in its 41st Report also speaks of introducing
only fine as an additional punishment to be imposed upon corporations in
lieu of fines. This restrictive thinking, according to Courts is based on
the maxim lex non cogit ad impossibilia, which tells us that law does not
contemplate something which cannot be done.[42] This reasoning in itself
shows that the law lacks in a non holistic viewpoint in the concept of
corporate criminal liability. The Courts have no doubt been efficient in
evolving the concept of criminal liability of corporate and have imposed
the same on the convicts but the only way of punishing them that has been
thought of is by way of fines. It is now for the legislature to evolve new
forms of punishments and incorporate them in the criminal justice system
of the land.

Conclusion
Corporate bodies reap all the advantages flowing from the acts of the
directors and they act to the detriment of the public in the name of the
corporate bodies.
From the above analysis, it is clear that ‘corporate criminal liability’
is not an alien term. This category of liability existed since time
immemorial. However, the legislature kept its mouth shut when the question
of imposing punishment arose with respect of corporate liability. With the
evolution of various theories, the most vital issue with regard to
corporate criminal liability settled i.e., the issue of mens rea. Concept
of vicarious and strict liability is an important aspect of corporate
criminal liability.

The criminal law jurisprudence relating to imposition of criminal
liability on corporations is settled on the point that the corporations
can commit crimes and hence be made criminally liable. However, the
statutes in India are not in pace with these developments and the above
analysis shows that they do not make corporations criminally liable and
even if they do so, the statutes and judicial interpretations impose no
other punishments except for fines. Apart from fines, punishments such as
winding up of the company, temporary closure of the corporation, heavy
compensation to the victims, by stepping on the weakness of the
corporation i.e., its goodwill, etc. Such means of punishment would have a
deterrent effect on the corporate and the sole aim of punishment under
criminal jurisprudence would be achieved.